Bayern President Uli Hoeness May End Up in Jail For Tax Evasion

Bayern's Uli Hoeness:The Rise And Fall of a Soccer Saint

By SPIEGEL Staff

DPA

Uli Hoeness, the president of Bayern Munich and an icon of German club soccer, could end up behind bars for tax evasion. The case has highlighted the dark side of the skilful entrepreneur and philanthropist whose burning ambition made Bayern what it is today -- and has now triggered his fall from grace.

Although he is not sitting in jail awaiting trial, although he has not been convicted, although he can sit in a stadium dressed in a suit with a red-and-white scarf and can spend his nights at home, Uli Hoeness, the president of top German soccer club Bayern Munich, is already a prisoner. He is a prisoner of a small device -- not an electronic shackle or a beacon that informs the authorities of his whereabouts. The device is a receiver. It informs its owner of developments on stock markets around the world, and Hoeness can't stop himself from constantly staring at it.

The last thing he does before he boards an aircraft is glance at the stock market prices -- and it's the first thing he does after landing. He always wants to know how his investments are doing, whether he is winning or losing. Anyone who has such a device subjects himself to the power of the markets and becomes Homo economicus, a creature of capitalism. Hoeness is like that -- and since he is like that, he may soon have to go to jail.

This is how this story could end -- a news story first broken a week ago Saturday by the German magazine Focus when it reported that Hoeness was under investigation on suspicion of tax evasion. That news marked the wildest week in the 113-year history of the legendary club: tax evasion, an arrest warrant that was dropped after bail was posted, a sweeping 4:0 victory over FC Barcelona, the transfer of midfielder Mario Götze from Borussia Dortmund, Bayern's offer for Borussia Dortmund forward Robert Lewandowski. The ugly face of the elite Bavarian club has returned just when it's playing the most stunning football in Europe.

It was an abundance of drama for seven days. And on the eighth day, a week ago Saturday, the plot thickened. Key sponsors of Bayern Munich convened to talk about Hoeness' future. As a tax dodger, he doesn't fit with their corporate image.

The case quickly took on political overtones because Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) and Bavarian Governor Horst Seehofer of its Bavarian sister party, the Christian Social Union (CSU), frequently sought advice from Hoeness. "The first time I heard the allegations, I thought: This can't be true," says Seehofer in an interview with SPIEGEL.

Fall From Grace

Until 10 days ago, Hoeness was still a pillar of the community and a shining example for politicians. Now, he has fallen from similar heights as Margot Kässmann, the former head of the Protestant church in Germany, who was caught drunk driving -- and Karl-Theodor zu Guttenberg, the former defense minister, who was often named as a possible successor to Merkel, but was engulfed in a plagiarism scandal surrounding his doctoral dissertation that ultimately forced him to resign. It appears that Hoeness has joined the surprisingly large number of German luminaries who become mired in scandal.

Hoeness' story is inextricably intertwined with the history of Bayern Munich, the record-holding German team that has won the league title 23 times including this year, winning it six match days before the end of the season. The Bavarians have played so well that even non-fans have stopped hating them -- that doesn't happen often.

Indeed, the story of Hoeness and Bayern Munich can also be told as a minor tale of capitalism with all the right ingredients -- with competition, the performance principle, depravity, indignation, freedom and games, but above all, of course, with greed, with the endless desire to consume more and more. And since this is the German variety of capitalism, there are also social elements. Hoeness stands for all of this.

Hoeness is in a bad way. This once towering, robust figure has retreated to his home and can't make sense of what has happened to him. His home is his castle, and more important to him than ever. His wife Susi is at his side, and sometimes friends drop in for a visit. Hoeness has largely avoided speaking with the press, although he did grant one interview this week with Die Zeit, but there are ways of finding out what's going on with him.

He is furious. Who leaked the fact that he had turned himself into the tax authority? He has a right to anonymity like anyone else. The timing could hardly be worse -- in the final phase of the season, in the run-up to the important matches in the Champions League.

The fact that Merkel and Seehofer have so quickly distanced themselves has embittered him. He has always defended them, he says, and now this. Where is their sense of decency? Are the upcoming election campaigns more important than loyalty? He finds that callous and brutal.

Hoeness Feels Hard Done By

He reads a great deal in the newspapers and tries to understand it all. Guilty? No, not morally, he says. He didn't act in bad faith or criminally, he insists. He was probably simply given bad advice on tax issues, he says. He sees himself as a victim of circumstance, and his explanations revolve around a tragic series of events.

He was moved by the words of Bayern Munich chairman Karl-Heinz Rummenigge who, with the knowledge that Hoeness had turned himself in, nevertheless said he couldn't imagine Bayern Munich without him. Hoeness sees this as a grand gesture. Rummenigge may come to regret having made that statement.

Many aspects of this affair still remain uncertain. What is known is that it began in 2000. Hoeness cultivated a friendship with Robert Louis-Dreyfus, who was the boss of sporting goods manufacturer Adidas, which supplied the Bayern Munich kit. It was the era of the New Economy and boundless stock market fever -- the first eruption of unchained capitalism after the collapse of communism. Anyone could play the capitalist game. Buy and sell, calls and puts -- it seemed like everyone could get rich, and many people gambled like mad.

Hoeness wanted a piece of the action and Louis-Dreyfus give him 5 million marks (2.56 million/$3.35 million) -- as play money, so to speak. It was deposited in a securities account with the number 4028BEA at Bank Vontobel, a Zurich financial institution known for its discretion. Subsequently, the bank reportedly granted Hoeness a loan amounting to 15 million marks, for which Louis-Dreyfus also acted as guarantor. Hoeness apparently gambled heavily with the money -- primarily on shares and currency exchange rates.

Today, Hoeness is sometimes described as a junkie, as a man who spent entire nights sitting in front of the TV in his hotel room to track stock market prices. "His stock market transactions run the gamut between riches and ruin," says one man who knows him well. "Other people go to casinos for that."

Gambling is one of the basic principles of capitalism, which is why it's often explained with game theory. It's not much different from playing poker. People speculate and bet on uncertainties -- the hidden cards, the vagaries of tomorrow's stock market. The appeal lies in the prospect of winning a fortune overnight, but also in the adrenaline-pumping fear of making huge losses. Hoeness apparently became addicted to the thrills, which isn't a crime. But it is illegal not to pay taxes on the winnings from such gambling.

Someone who is in a position to know says that Hoeness decided back before Christmas to turn himself in to the tax authorities, but then came the holidays, and his tax consultant went on vacation for two weeks. A great deal depends on whether Hoeness can prove this.

In early January, Bank Vontobel phoned Hoeness to say that someone from Germany's Stern magazine was doing some research on a celebrity from the sports sector: "Somebody is asking some stupid questions, just so you know." Hoeness reportedly flew into a rage and demanded that his tax accountant quickly write a voluntary declaration of tax liabilities.

On Jan. 12, Hoeness' letter arrived at the tax office in the southern German town of Miesbach. The sender was not a criminal tax lawyer, but rather Hoeness' long-time tax advisor Günter Ache, 65, who has his office in northern Germany. They met in the 1980s while skiing in Switzerland. Ache has an outstanding reputation as a tax consultant, but voluntary declarations are tricky. If it concerns speculation on the stock market, all purchases and sales have to be declared in detail. If an error is made, it dashes all hopes of avoiding a conviction.

Tax Authority Hands Tax Return to Prosecutor

Hoeness' text was rather sloppily written. For a number of years, he netted out his gains and losses from shares and currency dealings, which is not allowed. "A beginner's mistake," says a leading Munich criminal tax lawyer.

Hoeness made losses for two to three years, and calculated this as a negative balance. This is also not allowed. Not surprisingly, the tax authorities found that Hoeness' declaration was insufficient. They transferred the tax dossier to the Munich public prosecutor's office, which by Feb. 1 launched an investigation into Hoeness on suspicion of tax evasion and, in mid-March, searched his villa high above Tegernsee lake, a resort area in the Bavarian Alps. The officials presented a search warrant and a warrant for his arrest. Hoeness paid 5 million in bail, allowing him to continue to enjoy his freedom.

Since then, Hoeness has revised his voluntary declaration, which was said to be plausible, but not sufficiently detailed. Prosecutors are reportedly satisfied with the subsequently submitted version, but this no longer has any influence on the question of immunity from criminal prosecution. The public prosecutors calculated that Hoeness owed back taxes of 3.2 million, which he promptly paid. But now they want to know why a very large amount of money was temporarily deposited in his bank account. During a currency transaction, over 20 million reportedly accumulated in the account. Hoeness has yet to comment on this.

Sources within the judiciary say that investigators took such a hard line because they have a bone to pick with Hoeness. In Sept. 2011, after consuming copious amounts of alcohol, Brazilian player Breno, who was 21 years old at the time and a Bayern Munich defender, set fire to his rented villa in the affluent Munich suburb of Grünwald and was arrested. Hoeness was outraged at this treatment by the authorities and launched into a public tirade: "What the Munich public prosecutor's office is doing is an absolute disaster! Issuing an arrest warrant against a young man who is completely devastated, with the ridiculous justification that he may be suppressing evidence -- he can't speak any German!"

Later, he regretted making this comment. "My biggest mistake was to attack the public prosecutor's office. They didn't appreciate that at all," he said.

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The article you are reading originally appeared in German in issue 18/2013 (April 29, 2013) of DER SPIEGEL.

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